Return Filing Procedure

Pakistan has one of the lowest tax-to-GDP ratios in the world. For the uninitiated, tax-to-
GDP ratios are used to assess a country’s development year after year. They say the higher
the Gross Domestic Product (GDP) of the country, the higher the amount of tax revenues a
government can earn for the same since the value of goods and services its exports have
increased.

With those boring numbers and information out of the way, here’s why people who are
employed/salaried should care about filing their income tax returns now more than ever. You
must have heard about the bank transactions being taxed more for non-filers.

As it turns out, even real-time interbank transfers are charged a new withholding tax (WHT)
under section 236P of the Income Tax Ordinance 2001 for non-filers. All banking
transactions will be taxed at 0.3 percent WHT unless they file their income tax returns by
Nov 30th 2016. You also get charged more when buying cars or other property. And if your
WHT amount is greater than your applicable taxes, filing is the only method which can help
you get a refund, generally in thousands or rupees for the average person.

Moreover, if you file tax returns then chances are you could get better than usual services at
airports, excise offices and various other benefits that are not available to non-filers.

And this is where this simplified guide comes in. It will explain how to file tax returns online
hassle-free. No longer will you need to hire the services of a lawyer or tax consultant to do it
for you.

And since the process of registration is all online, you really don’t have the ‘aren’t nobody
got time for that’ excuse to play (unless you don’t happen to have a CNIC yet, in which case
you need to visit the NADRA office near you).

Things You Need to Know Beforehand

If you’re earning 400,000/- PKR or above in a year, then yes, the income tax applies to you.
Filing tax returns online can make this a lot convenient. The government determines how
 much the tax rate applies to your earnings year by year, with the annual Budget determining
these rates in June of every year.

Before filing tax returns online via FBR’s portal, you will need to calculate your tax rates for
the year 2015 accordingly based under which income slab you fall in.

For Individuals, Get Registered Online with FBR’s E-Enrollment System

As of November last year, FBR issued an SRO that stated that a filer can use their CNIC
number as NTN without the need to go through additional hassles related to registering the
NTN (National Tax Number). This development has taken the sting out of registering as a tax
payer in Pakistan. Here’s how you can register as one:

1. You’ll have to get your Registration Number and password first via FBR’s e-Enrollment
process. To do that, click here to get to the main page of Iris, FBR’s simplified ERP system
for tax payer registration.
2. You’ll need to go to ‘Registration for Unregistered Person’ if you’re a first time user. Provide
the information required.You’ll be sent a confirmation input to validate your account (usually
an email and/or SMS). You’ll be sent password/PIN to login with your account. Sometimes
this process might take a few days for security reasons.
3. Once you’re registered successfully and have logged in by entering your Registration No. and
password on the main page of Iris, you can now file your wealth statement.
4. For salaried persons, you will have to fill wealth statement and income tax returns. The
procedure for filling out your details for wealth statement income tax returns are present here.
5. More detailed help can be found here, concerning FAQs, Registration, Income Tax Returns
and more.

The UserID for Iris is your Registration Number as follows:

 In case of individual Pakistani – the 13-digits on CNIC/NICOP (without dashes)

 In case of individual Non-Pakistani – the 7-digits NTN (excluding dash and check digit)
 In case of AOPs/Companies – the 7-digits NTN (excluding dash and check digit).

For Companies and AOPs, NTN Registration is Required

 If you are a company/AOP, you can register for NTN (National Tax Number) online. (It’s
preferable to use Internet Explorer to do this; there will be problems with Chrome and
Mozilla Fox)

1. Visit the link e.fbr.gov.pk and select the tab E-registration.

2. Mention your CNIC Number, name and load image
3. Give your date of birth as per CNIC, your residential address, your activity, land line, mobile
number and email address
4. Since you are filling in the form yourself select the ‘Authorized Representative u/s 172 and
then select ‘Self’
5. Click on ‘Save Registry’
6. Then in the next column, mention your employers NTN and city of your employment if you
are an employee. If a businessman, fill in the details of your business as well.
7. Your application is complete. Click on ‘Print’ to get a print of the application and sign it.
8. It will alert you if there is an existing NTN from your previous job. If you still have doubts,
use your CNIC number to get it.
9. You will be allotted an NTN after 2 working days via an email.
10. Meanwhile, enclose a paid electricity bill, salary certificate and copy of CNIC with the
printed application and take it to your concerned RTO office. You will be issued the NTN
certificate.
 Difference between filers and non-filers specified

The Federal Board of Revenue (FBR) has specified difference between filers and non-filers
of income tax returns to double rates of withholding taxes for non-filers under Income Tax
Ordinance 2001 through Finance Bill (2014-15). Explaining the Finance Bill (2014-15), Syed
Naveed Andrabi, Advocate Supreme Court explained that a definition in Section 2 of the
Ordinance is being inserted to create and identify the difference between a filer and a non-
filer.

The person whose name is appearing in the list as an "Active Tax Payer" issued by the
Federal Board of Revenue shall b considered as a filer; also a person holding a "Taxpayers'
Card". This definition is being added with the intention to treat and differentiate between the
said two categories so that the tax withholding may be done at different rates that may be
prescribed under the Ordinance through this Finance Bill or later on from time to time. As
was being discussed earlier the rates for compliant taxpayers may be the same but for those
who are termed, as "Non-Filers" are likely to be at an enhanced rate. Sub-Section 23A & 35C
are being inserted in this regard.

The definition of Income as give in Section 2 (29) of the Ordinance is being amended to
include the term "Bonus Shares" as income; which earlier was excluded and were not liable
to tax. It means that the Bonus Shares shall now be taxable. A new Section 236M is being
proposed to be added which would mean that the person issuing "Bonus Shares" to a share
holder of a company shall withhold tax @ 5% of the value of bonus shares determined on the
basis of day end price on the first day of the closure of books. The company issuing shares
shall ensure collection of tax from the person to who such bonus shares are issued or else the
same shall be collected from the company by initiating proceedings u/s 161 of the Ordinance.

The definition of Stock Fund is also being inserted by inserting Sub-Section 61A into Section
2 of the Ordinance to identify a collective investment scheme or a mutual fund where the
investible funds are invested by way of equity shares in the companies to the extent of more
than 70% of the investment, he said.

In Section 37 of the Ordinance the words "held for a period up to two years" is being deleted.
This however, would not change the conditions that gain on immovable property held for
more than two years shall not be taxable under the Ordinance. The Division VIII of Part I of
the First Schedule is being amended to clarify that the 0% tax will be charged if the
immovable property is held for more than two years, he said.

The first proviso to Section 37A of the Ordinance is being omitted which means that
securities held for more than one year or twelve months shall now be taxable for the Tax
Year 2015 for which rates are also given as 12.5% for less than a year and 10% for a security
held more than twelve months but less than twenty four months. This means that the
securities held for less than two years or 24 months shall now be taxable starting Tax Year
2015. The definition of Securities is also being amended to include "debt securities" which
means TFC'S; SAKUK; PTC'S FIB'S T'BILLS & Currency Bonds, etc.

Pakistan Telecommunication Authority (Authority) is a taxable entity under the provisions of

Ordinance. The income of the Authority from auction of 3g and 4G licenses was thus liable
to tax. A proviso is added in Section 49 of the Ordinance to hold that the income from
auction of licenses of 3G and 4G is an income of Federal Government hence shall not be
taxed in the hands of the Authority.

A proviso is being added to Section 92 of the Ordinance; whereby the share of a company as
a member of Association of Persons (AOP) shall be excluded from the income of the AOP
and taxed accordingly in the hands of the company at the normal rates applicable to the
company. This means that the minor reduction available to a company by way of taxed
income from AOP has been withdrawn, Andrabi said.

The Clause (d) of Section 100B (2) which read as a "foreign institutional investor" being a
person registered with NCCPL as a foreign institutional investor; is being substituted by a
"Company in respect of Debt Securities only. This means that the provisions of Section 100B
shall not apply to a company to the extent of Debt securities; whereas the elimination of
"foreign Investor" may cause concerns.

A new Section 100C is being inserted whereby the Trusts; non-profit Organisations and
Universities etc, shall be allowed tax credit equal to 100% of the tax under any head except
u/s 161; 162 of the Ordinance; provided they file their tax returns; have withheld the tax from
the payments made and have filed their withholding statements. The respective exemptions
available to such person in Part I of the Second Schedule to the Ordinance have been deleted.

The rate of 1% as minimum tax given in Section 113 has been deleted and separate rates in
Division IX of Part I to the First Schedule to the Ordinance have been given. The new rates
shall be 0.5% for Oil Marketing Companies; Oil Refineries; Sui Northern & Southern
Companies, if turnover is over 1 Billion; Pakistan International Airlines and Poultry Industry.
The rate of 0.2% for Distributors of pharmaceuticals; fertilisers and Cigarettes; Petroleum
Agents and Distributors if they are registered with Sales Tax; Rice Mills and dealers; Flour
Mills. For Motor Cycle dealers registered with Sales tax 0.25% and to all other case to whom
Section 113 applies it will be 1% of the turnover.

A new Section 113C is being introduced in the Ordinance, which suggest levy of Alternative
Corporate Tax which will be applicable from the Tax Year 2014. This means that apart from
minimum tax there is yet another comparison for corporate taxpayers. The tax on Corporate
Rates or Alternative Tax @ 17% of the accounting profit before tax shall have to be paid. A
complete mechanism is proposed along with powers vested in the Commissioner to play
around with the adjustments. This will be another branch that may lead to new set of
litigation; as the concept of Income under the Ordinance and Accounting parlance is being
substituted.

The requirement of filing Wealth Statement is being restricted to a "Resident Person" only.
Earlier on all taxpayers; irrespective of their status were required to file a wealth statement
along with the return if beyond a certain threshold. The provisions of Section 130(4) of the
Ordinance are being amended to include Cost & Management Account with 10 years
standing in practice as eligible for appointment as an Accountant Member to the Appellate
Tribunal Inland Revenue.

The provisions of Section 149 of the Ordinance are being amended to include the Directors
Fee or Fee for attending Board meetings as a salary on which the rate of withholding is
suggested @ 20% of the gross amount. The said tax shall be adjustable. This amendment
resolves the controversy as to whether such fee paid by a company is a salary or payment for
services that may be liable to tax @ 7% of the gross amount. The FBR had earlier clarified
such fee to be a service and liable to tax @ 7% of the gross amount. The controversy shall hit
the government nominated directors the most.

For Deduction of tax on dividends paid a new Division is being introduced which suggest
withholding as 7.5% on power projects; from stock funds @ 12.5% for the Tax Year 2015
and onwards if the Dividends are less than capital gains; Dividends received by a company
from stock fund; CIS and Mutual Funds shall be 25% for the tax year 2015 onwards. All
others 10% if filers and in case of non-filers 15%.

Similarly, there are changes being brought into Section 151 of the Ordinance to suggest
different rates of withholding for different person including filers @ 10% and non-filers @
15%. The non-filers receiving yield or profit on debt less than Rs 500,000/- shall be subjected
to 10% withholding. A proviso has also been added to Section 151 of the Ordinance whereby
the tax deducted from the non-filer shall be final to the extent of 10% and the extra 5% shall
be adjustable against other income, if he may file the return of income. The apparent reason
is to protect small recipients; however, how will the payer identify that the non-filer has not
crossed the maximum limit. Another Pandora's Box is being opened for banks whereby the
harsh provisions of Section 161 of the Ordinance shall be used.

The contracts signed by sports person with sponsors and employers are now being subjected
to withholding tax u/s 153 (1) (c) of the Ordinance. A new Section 181AA is being
introduced which suggests that at the time of applying for a new industrial or commercial gas
or electricity connection a pre-requisite of registration under the Income Tax Ordinance shall
have to be obtained.

Section 231B is proposed to be substituted to suggest that not only at the time of registering
the motor vehicle but also on transfer of the vehicle advance tax shall be collected. These
rates are being revised for filers and enhanced rates for non-filers. Section 235A is being
introduced to withhold tax on domestic consumers of electricity having monthly billing of Rs
100,000 or more.

Section 235B is also being introduced for collection of Income Tax equal to Re. 1 on each
unit of electricity unit consumed by the steel melters, re-rollers registered under Sales Tax
Special Procedures. Advance Tax @ 1% of the value of the property is also being proposed
to be collected at the time of transfer of immovable property valued more than three million,
which shall be adjustable. In case of non-filer it shall be 2% of the value.

In case of Foreign Air Travel in Business Class or First Class advance tax shall be collected
from filers and non-filers @ 3% & 6% of the value respectively. These proposed changes
shall bring in change or increase in taxation, which would then result into more refunds of the
legitimate taxpayers and cost of non-filers; unless they are brought into tax net. The emphasis
should be on broadening the tax base and not increase in withholding avenues, Andrabi
added.
 REVIEW OF THE BUDGET 2018-19

SALIENT FEATURES

 The total outlay of budget 2018-19 was Rs 5,932.5 billion. This size was higher
by 16.2% than the size of budget 2017-18. The size of outlay increased further
to Rs. 6,409.3 billion in revised estimates for FY. 2018-19.

 The resource availability during 2018-19 had been estimated at Rs 4,917.2 billion, which
increased to Rs 5,062.8 billion or by 3% in revised estimates 2018- 19.

 The net revenue receipts for 2018-19 had been estimated at Rs 3,070.4 billion, which
decreased to Rs 2,569.0 billion or by 16.3% in revised estimates 2018-19.

 The provincial share in federal revenue receipts was estimated at Rs 2,590.1 billion during
2018-19, which decreased to Rs 2,462.7 billion or by 4.9% in revised estimates.

 The net capital receipts for 2018-19 had been estimated at Rs 443.1 billion, which increased
to Rs 1,031.7 billion in revised estimates 2018-19 or by 132%

 The external receipts in 2018-19 were estimated at Rs 1,118.0 billion, which increased to Rs
1,403.2 billion in revised estimates or by 25.5%.

 The overall expenditure during 2018-19 had been estimated at Rs 5,932.5 billion, out of
which the share of current expenditure was Rs 4,780.4 billion. Current expenditure in revised
estimates 2018-19 showed an increase of Rs 809 billion from budget estimates.

 The expenditure on general public service for budget 2018-19 was estimated at Rs 3,340.4
billion, which was 69.9% of the total current expenditure.

 In budget 2018-19, the development expenditure outside Public Sector Development

Programme (PSDP) was estimated at Rs 180.2 billion, which dereased to Rs 17.3 billion in
revised estimates 2018-19.

 To meet expenditure in fiscal year 2018-19, bank borrowing was projected at Rs 1015.3
billion, which has been revised upwards to Rs 1,356 billion

THE BUDGET 2019-20

 SALIENT FEATURES

 The total outlay of budget 2019-20 is Rs 8,238.1 billion. This size is 38.9% higher than the
size of budget estimates 2018-19.

 The resource availability during 2019-20 has been estimated at Rs 7,899.1 billion against Rs
4,917.2 billion in the budget estimates of 2018-19.

 The net revenue receipts for 2019-20 have been estimated at Rs 3,462.1 billion indicating an
increase of 12.8% over the budget estimates of 2018-19.

 The provincial share in federal taxes is estimated at Rs 3,254.5 billion during 2019-20, which
is 25.7% higher than the budget estimates for 2018-19.

 The net capital receipts for 2019-20 have been estimated at Rs 831.7 billion against the
budget estimates of Rs 443.1 billion in 2018-19 reflecting an increase of 87.7%.

 The external receipts in 2019-20 are estimated at Rs 3,032.3 billion. This shows an increase
of 171.2% over the budget estimates for 2018-19.

 The overall expenditure during 2019-20 has been estimated at Rs 8,238.1 billion, out of
which the current expenditure is Rs 7,288.1 billion.

 The expenditure on General Public Services is estimated at Rs 5,607.0 billion, which is

76.9% of the current expenditure.

 The development expenditure outside PSDP has been estimated at Rs 85.8 billion in the
budget 2019-20.

 To meet expenditure, bank borrowing has been estimated for 2019-20 at Rs 339 billion,
which is lower by 688.7 billion than the revised estimates 2018-19 reflecting decrease at
75%.
 Project phase : 01

Subject: Buisness taxation

Submitted to: Prof Zubair

Submitted by: Abdul Manan, M Talha ,Marsad shaukat,Zain

Reg no: 0002,0003,0004,0019